The Directorate-General of Goods and Services Tax Intelligence (DGGI) has uncovered a massive tax evasion scam by online gaming companies in India. The DGGI estimates that these companies have evaded nearly Rs 31,000 crore in GST.
Official sources told BT TV that the authorities are in the process of sending show cause notices to around 80 online gaming companies suspected to be involved in this scam.
The investigation found that these companies were using various techniques to evade GST, such as:
- Misclassifying their services: Online gaming companies were misclassifying their services as games of skill, which are exempt from GST, instead of games of chance, which are subject to GST.
- Under-reporting their revenue: Online gaming companies were under-reporting their revenue to reduce their GST liability.
- Routing their transactions through offshore entities: Online gaming companies were routing their transactions through offshore entities to avoid paying GST.
The government has recently taken a number of steps to crack down on tax evasion by online gaming companies. In August 2023, the GST Council decided to impose a 28 per cent tax on the full value of bets placed on online gaming, casinos, and horse racing. This decision will take effect from October 1, 2023.
The government has also launched a number of initiatives to educate online gaming companies about their tax obligations. In June 2023, the Central Board of Indirect Taxes and Customs (CBIC) issued a circular clarifying the GST implications of online gaming.
The crackdown on tax evasion by online gaming companies is a welcome move by the government. This will help to ensure that the government receives its due revenue and that the online gaming industry operates in a fair and transparent manner.
Impact of the alleged GST evasion on the Indian economy
The alleged GST evasion by online gaming companies has a number of negative impacts on the Indian economy.
First, it deprives the government of much-needed revenue. GST is a major source of revenue for the government, and the evasion of this tax by online gaming companies is a significant loss.
Second, it creates an unfair advantage for online gaming companies that are evading GST. These companies can offer lower prices and better services than their competitors who are complying with the tax laws. This can stifle competition and innovation in the online gaming industry.
Third, it undermines the public’s trust in the government. When people see that online gaming companies are able to evade GST with impunity, it undermines their faith in the government’s ability to collect taxes fairly and equitably.
What can be done to prevent tax evasion by online gaming companies?
The government can take a number of steps to prevent tax evasion by online gaming companies, such as:
- Strengthening enforcement: The government should strengthen enforcement of the GST laws to deter online gaming companies from evading taxes. This includes increasing the number of audits and inspections of online gaming companies, and imposing strict penalties for tax evasion.
- Simplifying the tax regime: The government should simplify the GST regime for online gaming companies to make it easier for them to comply with the tax laws. This will reduce the scope for tax evasion and make it easier for the government to track the revenue of online gaming companies.
- Educating online gaming companies about their tax obligations: The government should educate online gaming companies about their tax obligations and the consequences of tax evasion. This will help to raise awareness among online gaming companies of their tax compliance obligations and deter them from evading taxes.
The government should also work with the online gaming industry to develop a self-regulatory framework to prevent tax evasion. This framework could include measures such as requiring online gaming companies to disclose their revenue and profits, and to implement internal controls to prevent tax evasion.
By taking these steps, the government can prevent tax evasion by online gaming companies and ensure that the government receives its due revenue.tunesharemore_vertadd_photo_alternate
